For pensioners, already hit by a sharp hike in fuel prices and the cost of water set to go up by around 18% over the next five years, there'll be more bad news when their council tax bills start dropping through their letterboxes next month.

This year's council tax rise, which is expected to average 5%, may be less of a blow than two years ago when bills went up by an average of 12.9%, sparking the first pensioner protests, and will be a slight improvement on this year's average increase of 5.9%. But it's still expected to push the average council tax bill above the £1,000 mark.

And there's worse to come for the current charging system, where homes are placed in one of eight bands accord ing to their value, is based on 1991 property prices. But this year homes are being re-assessed with the revised values due to be used for the charging system from April 2007. Given the rise in house prices since 1991, this will inevitably push many homes into a higher charging band, particularly hitting pensioners on fixed incomes living in areas where house prices have soared.

And setting off major alarm bells are suggestions that the government is considering increasing the number of bands both at the top and the bottom end. This has been refuted by the government, arguing that it was just one of many options put forward by the New Policy Institute in its submission to the review of local authority funding.

When published last summer, the review concluded that council tax whould be "retained but reformed". Whatever the final outcome, the whole issue has been put on hold as the government has commissioned yet another enquiry which won't be published until the end of this year.

But now the good news is that local government minister Nick Raynsford publicly acknowledged the first enquiry's recommendation that, if the council tax is retained, then vital changes are needed to reduce the impact of property revaluation on people with low incomes living in high-value properties.

The report also argued that changes are needed to the council tax benefit sys tem to make it fairer and more effective - for example, by raising the savings limit which is one of the measures used when calculating elegibility. Added to which further steps were needed to improve take-up among pensioners and others on low income.

Sadly, though the report said that these changes did not need to wait for structural reform of council tax itself, nothing has since been done to change the elegibility criteria.

But the government has at least got its act together a bit earlier this year and already launched a press campaign to urge pensioners to claim council tax benefit (CTB) to help cut their bills.

The Department for Work and Pensions (DWP) has also committed £13m over two years to a Partnership Fund to finance initiatives by 170 charities and other community organisations to encourage older people to take up the benefits that they're entitled to.

According to the DWP, four out of ten pensioners are still failing to apply for council tax benefit, which could on average cut their bills by £426, leaving as much as £750m left unclaimed.

This is in spite of the fact that since the intrroduction of the Pension Credit many more pensioners have become eligible for CTB, which is broadly based on your income and savings as well as the size of your council tax bill. And this can benefit those who don't even claim the credit.